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2008's almost over, and shell-shocked investors can hardly wait to put it behind them. Yet while you might think things can't get any worse in 2009, you still need to keep your guard up.

The past year taught us a lot of painful yet valuable lessons. In order to make sure we don't repeat some of the investing mistakes that caused such huge losses this year, let's take a moment and review what we learned the hard way in 2008.

Lesson 1: The stock market is still cyclical.After five years of positive returns for the markets, investors got complacent and thought the good times could last even longer. Yet repeatedly, the market sent shares in sectors that climbed too high crashing down to earth.

Financial stocks make the most obvious example of this phenomenon, having plummeted after the end of a multiyear run of strong performance. But it's not just financials that have acted this way. Natural resources companies like Vale (NYSE: RIO) and Rio Tinto (NYSE: RTP) climbed to record highs at midyear, only to lose well over half their value in the ensuing months. Oil and gas stocks like ConocoPhillips (NYSE: COP) and XTO Energy (NYSE: XTO) rode the wave toward $150 oil only to lose years of gains between July and November.

Those who decided the Fed had mastered the business cycle have learned that indeed, it wasn't different this time.

Our must-do here: Be aware of cyclical businesses and take profits during high times. Although it may seem otherwise during long bull markets, cyclical businesses simply aren't recession-proof.

Lesson 2: Volatility is here to stay.The market emerged from an uncharacteristically quiet period during 2008. Investors got accustomed to market stability during the last bull market, as stocks rose substantially with only a few corrections along the way.

Now, though, we've gotten used to big bumps in the road. In October and November, the Dow closed with a gain or loss of more than 100 points in all but six sessions. Swings of 400-500 points within a single day have been quite common. Yet while all those ups and downs might send you running for cover, smart investors have tapped it to their advantage, capitalizing on unique opportunities to grab shares at bargain prices. Just ask investors who picked up shares of Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) at levels not seen in the past five years.

Must-do: Embrace volatility. Although market prices change every minute, the fundamental value of the business does not. Have faith in your assessments, and when the market gives you a bargain, don't doubt yourself -- grab shares while they last.

Lesson 3: Don't run out of ammunition.Lots of investors took advantage of losses during the first part of 2008 by adding to their stock investments. But if you ran out of cash early in the year, you missed out on some even better bargains that became available in October and November.

The must-do here: Make sure you keep a reserve of cash to parcel out in chunks throughout an extended market downturn. You won't always pick the exact bottom, but you'll make sure you don't come up empty at the best time to buy.

Lesson 4: Prepare for reversals.2008 was almost universally bad from a news perspective. But in 2009, you can expect to see a more bipolar attitude in the markets: Fears of deflation versus inflationary concerns, as well as fits and starts of growth amid the malaise of an economic recession, will all keep policy-makers and investors on their toes trying to separate false alarms from the real thing.

The must-do for investors is to come up with your own view of economic conditions, remaining open to contrary data but realizing that conflicting information will make predictions difficult for a long while.

Lesson 5: Stock picking isn't easy.In navigating the bear market, even veteran managers found that the rules had changed this time around. The best of the best weren't immune from value traps like Fannie Mae (NYSE: FNM) and AIG -- and even stocks with strong fundamentals didn't escape without losses.

Your must-do: Don't give up on picking stocks, but don't expect to be right 100% of the time. Take measures to cut your losses while extending your winners as far as they'll go. You'll get greater profits in the end.

2008 is a year you probably want to forget. But don't forget everything. By remembering the lessons you've learned, you'll be a better investor for the rest of your life.

Want some advice on investing for 2009? Get the best tips from Fool co-founders Tom and David Gardner, available from theirMotley Fool Stock Advisornewsletter. Each issue comes packed with stock ideas and the reasoning behind them. Don't wait 'til next year -- see it today with a 30-day free trial.

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Ahead you have 1st.Q dismal Earnings Reports, Inauguration, Conflicts in IRAQ, PALESTINE, ISREAL, SOUTH KOREA, the confronting of the Stimulus Package, Higher unemployment figures, more pink slips and more foreclosures, and more bankruptcies with probably another scandal or two in the coming days ahead!

ONE OF THE DO'S FOR 2009 IS INVESTING IN GOLD FOR SURVIVAL! You'll see that this Cap Fool is 100% right before the First Quarter Ends!

Sending report...

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.
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